In a Nutshell
Let’s face it: It’s tough to choose a credit card when there’s a sea of options out there. What do these credit card types have in common, and what sets them apart?If you’re looking at new credit card offers, you’ve probably noticed there are quite a few options out there.
The truth is there are many different types of credit cards available, and the offers and benefits may vary based on your needs.
Have credit that needs work? There’s a credit card for you. Want to earn cash back or get travel rewards? You’re covered.
Below, we’ll break down the various types of credit cards and discuss which may be a good fit for you.
- Unsecured credit card
- Secured credit card
- Balance transfer credit card
- Travel rewards credit card
- Gas rewards credit card
- Cash back rewards credit card
- Student credit card
- 0% intro APR credit card
- Retail card
1. Unsecured credit card
Unsecured credit cards are the most common type of credit cards. Unlike secured credit cards, unsecured credit cards don’t require you to deposit cash as collateral.
These cards are good for most people and can help build credit. Travel rewards and cash back cards are common examples of unsecured cards.
A good starter unsecured credit card is the Capital One Platinum Credit Card, which has no annual fee.
2. Secured credit card
If your credit needs work or you have no credit history, a secured credit card may be a good fit for you.
Secured credit cards typically require you to put up a deposit to secure your line of credit. Your credit limit is usually equal to the amount of your deposit (if one is required).
For example, if you deposit $500, you could get a $500 line of credit on that card. And if you decide to close your secured card but have an outstanding balance, you may not get your deposit back.
Secured credit cards are typically limited in their reward offerings, but they can be a good option for those looking to rebuild or establish credit.
The Discover it® Secured Credit Card is a solid secured card that has no annual fee and offers cash back rewards.
3. Balance transfer credit card
Are you in credit card debt and looking to save money on interest? A balance transfer card may help you do just that.
Balance transfer credit cards allow you to transfer credit card debt from other credit cards or lenders, and typically offer a 0% introductory APR for transfers for a certain amount of time.
This can be a big advantage if you transfer high-interest debt. It’s important to note that the introductory APR won’t last forever, so make sure you have a plan to pay down debt within the promotional intro period.
Also, many balance transfer credit cards have a balance transfer fee of 3% to 5%, so check what costs and fees you’ll be paying if you opt for this type of card.
4. Travel rewards credit card
Is travel at the top of your bucket list? A travel rewards credit card can help you save money on travel-related purchases.
Travel rewards credit cards may come with an annual fee, but they offer programs where you can accrue enough miles or points to redeem for flights and/or hotel stays.
For example, you may get one mile or point per $1 spent on anything on your credit card and receive a signup bonus after meeting a spending requirement within a certain amount of time.
A good credit card for travel rewards is the Chase Sapphire Preferred® Card. You’ll earn up to $50 in statement credits every account anniversary year for hotel stays you book through Chase Travel℠, five points per $1 spent on travel through Chase (excluding hotel purchases that qualify you for the anniversary hotel credit) and two points on other travel.
You’ll also earn three points at restaurants, on eligible online grocery purchases and on select streaming services, and one point per $1 spent on other purchases.
5. Gas rewards credit card
If you have a long daily commute or work as a contract driver through Uber or Lyft, a gas rewards credit card could be a good fit. This type of rewards credit card typically offers good to great rewards on gas purchases.
Note that some gas rewards cards may restrict the amount of rewards you can earn or offer more rewards during certain months. This type of credit card is generally good for people who drive a lot and can benefit from the rewards.
An example of a rewards credit card that offers great cash back rewards for gas purchases is the Blue Cash Preferred® Card from American Express, which offers 3% cash back at U.S. gas stations.
You’ll also get 3% cash back on transit (including taxis/rideshares, parking, tolls, trains, buses and more), along with 6% cash back on select U.S. streaming subscriptions, 6% cash back at U.S. supermarkets on up to $6,000 spent per year, and 1% cash back on all other purchases.
6. Cash back rewards credit card
Cash back credit cards allow you to earn rewards when you make a purchase. These rewards can usually be redeemed for statement credit, cash back or gift cards.
Some cards offer a flat percentage for cash back, while others may have bonus categories where you can earn even more cash back. This type of credit card is a good option for budget-savvy cardholders looking to get the most bang for their buck.
A good cash back credit card is the Citi Double Cash® Card, which allows you to earn 2% cash back — 1% on purchases and an additional 1% as you pay for those purchases.
7. Student credit card
Student credit cards are typically reserved for college students who have little to no credit history and are looking to build their credit from scratch. These cards can be easier to get approved for, but they also usually have a lower credit limit.
Some student credit cards might be secured credit cards, meaning they may require a cash deposit as collateral. They also tend to have higher interest rates.
8. 0% intro APR credit card
Credit card interest rates can be relatively high, with APRs between 19% and 30%. Because of this, a 0% intro APR credit card can be an attractive option for consumers looking to make a big purchase and pay it off over a certain period of time.
The APR will eventually increase, so it’s important to check the post-intro APR before applying. A 0% intro APR can be a useful perk, but you’ll definitely want to read the fine print.
9. Retail card
Retail cards generally result from a partnership between a bank and a big retailer, or are issued by big retailers themselves.
They fall into two main categories.
- Closed loop: You can only use this type of credit card at the retailer in question.
- Open loop: This type of card is sponsored by a retailer and backed by a major credit card network such as Visa or Mastercard. You can use it to make other purchases outside of the retailer.
Closed loop retail cards can be a good option to help build credit, as you may get approved for a card even with average credit. This is less applicable for open loop retail cards, as these may be subject to similar credit requirements as traditional credit cards.
But closed loop retail cards often also come with low credit limits and high interest rates — so if you get one, keep a close eye on your spending as it can affect your credit.
For example, if you have a retail credit card with a limit of $400 and you spend $200 on it, your credit utilization is 50%, which is well over the 30% maximum recommended by experts.
If you’re using a retail card to build credit, check with the card issuer to make sure that your payment history is being reported to the credit bureaus.
Bottom line
While there are many different credit card types out there, it’s important to assess your goals before choosing a credit card. You want to find one that fits with your lifestyle, values and financial picture.
Choosing the right credit card and knowing the pros and cons can help set yourself up for success.
*Approval Odds are not a guarantee of approval. Credit Karma determines Approval Odds by comparing your credit profile to other Credit Karma members who were approved for the card shown, or whether you meet certain criteria determined by the lender. Of course, there’s no such thing as a sure thing, but knowing your Approval Odds may help you narrow down your choices. For example, you may not be approved because you don’t meet the lender’s “ability to pay standard” after they verify your income and employment; or, you already have the maximum number of accounts with that specific lender.